Increasingly agents are weighing up the pros and cons of having offices in London. Noella Pio Kivlehan reports on the reasons why companies are considering leaving,or moving to cheaper areas of the capital
There are some regional agents who truly believe that in the next five years regional offices will become more important in business and profit making terms than London’s West End offices.
Their reasoning is economic: the slowdown of the capital’s market, rising vacancy rates, problems with leasing and declining rents, and no immediate possibility of recovery.
Nigel Kempner of Benchmark, a property company that specialises in central London, is predicting the market will not improve until 2005 at the latest.
Meanwhile, the regions have not been hit as hard as London by the economic slowdown, and are continuing to grow.
This factor has not gone unnoticed by London agents, and an increasing number are opening branches for the first time in the UK’s major cities.
In the past two years, Newcastle has welcomed Gerald Eve, King Sturge and Lambert Smith Hampton.
Collectively, Glasgow, Edinburgh, and Belfast have seen numerous national players opening, while GVA Grimley says that 50% of its income is regionally-based.
Even West End agents agree the regions have added kudos. “For a lot of major firms, the regions have made more and more money. There’s more growth and land there,” says Knight Frank’s Tim Robinson.
Given the gloomy picture in London, does this mean West End agencies will pack their bags and head up North, leaving the capital to become an expensive shopfront?
The answer is yes and no.
Yes, high London office prices, and difficult market conditions are making firms look outside the West End. And no, for agents still need to be in the capital if they are going to be serious international players.
In a tightening economy with the threat of war, agents are understandably looking at saving money. Evidence is clear of West End agents tightening their belts.
Jones Lang LaSalle was among several top firms to make staff redundant in the past two years, while last year others such as DTZ, Chesterton and Fletcher King have announced profit warnings.
If most agents are asked, they will admit that cutting costs is something they cannot ignore. Being in the West End, where prime office rent averages £63 per sq ft compared with around £21 per sq ft in Leeds, is something that has to be considered.
Human resources
Cost cutting is the reason Drivers Jonas andGVA Grimley decentralised some of their departments.
Four years ago, Drivers Jonas moved its fee-earning facilities management team to Slough, Berkshire, while Grimley’s staff were relocated to Birmingham five years ago.
“It was to save on London costs,” says Michael Corbett, head of Grimley’s. “In straight accommodation terms, estimates are that we would have saved 60% of our rent.”
Corbett says “non-essential front line people” such as human resources and the accounts department, were relocated to its Birmingham office.
Corbett is keen to stress that the move was done in a “very constructive way”.
“We didn’t want to dump them in a backwater. They are still a very important part of our office.”
Other agents are keeping on their agendas the possibility of moving.
“Moving back office staff out to the regions will always be kept as an option. It’s a cost issue and if we analyse that type of thing for our clients, then we should do it for ourselves,” says Robinson, who sits on the board that will decide what Knight Frank will do when the leases on its West End offices expire in 2007.
Despite one agent’s quip that he would like to put all back office staff “on Mars”, some agents view having all their team together – from post boy to managing director – as imperative.
Andy Gulliford at Cushman & Wakefield Healey & Baker agrees moving back office staff is a big issue, but he says CWHB took a policy decision not to do it.
“We prefer to be together, as people work off all departments,” he says.
The debate has mostly been about back office staff because of that well-versed property mantra: location, location, location.
While it is possible to move Corbett’s “non-essential” personnel, agents need to be in London for three reasons: clients, address, and international respectability.
Even Corbett says there is no question of Grimley closing its West End base.
“Firstly, we have 15 years left on our lease, but secondly, and more importantly, we think it’s right for the image of our business that our European headquarters is in London.”
Most West End agents agree with Corbett. “Anyone serious in the international market will want to be in the West End,” says Gulliford.
But, unfortunately, the issue of cost still lingers. Moving to the regions is on the macro-level for agents, but on a moremicro-level, companies have been carrying out mini-decentralisation.
The past few years have seen firms move out of the more expensive areas, such as Mayfair, where prime headline rents are £70 per sq ft, to cheaper areas of the capital.
Transport links
“There does seem to be a migration of agents out of the core of Mayfair,” says Robinson, adding that the area just north of Oxford Street, where prime rents are £44 per sq ft, is becoming a preferred choice.
“It benefits from good transport links – as staff retention must remain an issue – it has a professional address, because image is important, and it is still centrally located,” adds Robinson.
David Hallett of King Sturge agrees. “The industry we are in is very location sensitive.”
Joining the migration, the newly-merged CB Hillier Parker and Insignia Richard Ellis will leave Mayfair and base its West End team in Wimpole Street.
But even the smallest move is still sensitive.
Gulliford says there was concern when CWHB moved from Hanover Square to Portman Square just north of Oxford Street, but he says “it has been a major success.” A move further out of central London could have caused bigger problems, however.
“At one stage we were thinking of moving further out to Paddington and I am pleased we didn’t, because we are still within walking distance of other agents and most of our clients,” says Gulliford.
Allsop is another agent that proves Mayfair does not have to be the place to be.
“We did consider moving to Mayfair when we took this building [27 Soho Square] in 1986, and reconsidered it when we refurbished three years ago,” says Alan Collett of Allsop. “But we couldn’t justify the extra cost of being in Mayfair. We asked ourselves; what do we get for being over there? And the answer is: there’s not that much difference.”
With the advance of technology some argue that it does not matter whether offices are in the regions, Mayfair or elsewhere in London.
But personal contact is still what the agents are all about. And while no-one doubts the growing strength of the regions, it is still necessary for companies to be in the capital.
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Movers and shakers |
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Some national companies have moved to cheaper areas of London or moved entire departments out of the capital. Others are facing rent reviews, which could prompt a move |
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Cluttons: Currently in Berkeley Square, is moving to Land Securities’s Portman House, Portman Street |
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Cushman &Wakefield Healey & Baker: Moved out of Mayfair last year to Portman Square |
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Dunlop Heywood Lorenz: Left Hanover Square last October to move to Queen Anne Street, W1 |
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DTZ: The Curzon Street-based company faces a rent review in November. The company says it has “no plans to move”. Other agents, however, say it “could be interesting” to see what happens |
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GVA Grimley: Relocated its back office to Birmingham in 1998. Having taken over 17,000 sq ft of Regus space, it intends to relocate some of its other departments to 10 Stratton Street, W1 |
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Jones Lang LaSalle: An exception from a lot of its counterparts. The company renewed and extended its lease to fix the rent on 22 Hanover Square, with a break in 2009, and an expiry date of 2014 |
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Knight Frank: having arranged for the majority of its leases to expire in 2007, the company has formed a focus group to decide a strategy for 2007. Although there is no plan yet, decentralisation of at least some departments has not been ruled out |
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King Sturge: A spokeswoman for the firm at7 Stratford Place, W1, says she “doesn’t know of any plans, or of any future plans” to decentralise or relocate within London |
